• 10 hours Is $90 Oil Possible? An Interview With Jay Park
  • 1 day Billions Of Dollars Are Flooding Into The Flying Taxi Space
  • 1 day Is This The Most Important Energy Project Of 2020?
  • 2 days Startups Are Dying To Give You A Better Death
  • 2 days U.S. Restaurants Are Struggling With Rising Labor Costs
  • 3 days The Banking Bonanza Is Just Getting Started
  • 3 days How The Trade War Ceasefire Will Impact The Energy Industry
  • 4 days Who Is The Most Dangerous Person On The Internet?
  • 4 days SoftBank Sees First Quarterly Loss In 14 Years
  • 6 days Prepare For An Oil Glut In 2020
  • 7 days Why A Strong Yuan Is A Promising Sign For The Trade War
  • 8 days What Would You Sacrifice For A Debt-Free Life?
  • 8 days Shareholders Urge Major Bank To Stop Funding Fossil Fuel Companies
  • 8 days Tariffs Are Causing A Slowdown In U.S. Manufacturing
  • 9 days The Great Silicon Valley Migration Has Begun
  • 9 days 3 Oil Stocks Paying Out Promising Dividends In 2020
  • 10 days How Fractional Trading Is Democratizing the Stock Markets
  • 10 days Why Smart Money Is Looking To Short Aramco
  • 10 days Gold Major Looks To Hike Dividends By 79%
  • 11 days Three Reasons Precious Metals Are On The Rise
Is The Bull Market On Its Last Legs?

Is The Bull Market On Its Last Legs?

This aging bull market may…

What's Behind The Global EV Sales Slowdown?

What's Behind The Global EV Sales Slowdown?

An economic slowdown in many…

Another Retail Giant Bites The Dust

Another Retail Giant Bites The Dust

Forever 21 filed for Chapter…

Prieur du Plessis

Prieur du Plessis

With 25 years' experience in investment research and portfolio management, Dr Prieur du Plessis is one of the most experienced and well-known investment professionals in…

Contact Author

  1. Home
  2. Markets
  3. Other

Are We Seeing a Dividend Bubble?

Given the plethora of market uncertainties, investors have over the past few months started placing an increasing emphasis on dividend yield. In particular, multi-national companies operating in regions or sectors that would enable them to grow dividends over the next few years have gained favor. These so-called dividend Aristocrats have recorded strong relative performance compared with the benchmark indices, as illustrated by the relative price chart below of the S&P 500 High Yield Dividend Aristocrats Index versus the S&P 500 Index.

S&P HYD Aristocrats/S&P500 Index
Source: StockCharts.com

This trend raises the raising the question: Are we seeing a dividend bubble?

I concur with the answer provided from across the pond by David Fuller, co-author of FullerMoney, as follows: "The short answer is not yet, but all good trends eventually develop some bubbly characteristics, of a greater or lesser degree. A number of high-yielding, multinational 'Autonomies' have shown impressive relative strength this year. Two warning signs to watch out for are: 1) trend acceleration relative to their 200-day moving averages; and 2) price-earnings ratios that are clearly higher than most other sectors or the market generally.

"Another test for these shares, for which I maintain current relative strength is understandable, will occur when a stronger overall market environment revives 'animal spirits' sufficiently for investors to chance their luck in small-caps and other laggards."

Also read The Wall Street Journal's recent article, "Dividend Stocks Become the Heroes - Shares Often Derided as for 'Widows and Orphans' Are Outdoing Their Lower-Yielding Cousins".

 


Did you enjoy this post? If so, click here to subscribe to updates to Investment Postcards from Cape Town by e-mail.

 

Back to homepage

Leave a comment

Leave a comment